Tesla Passes BMW In Market Cap To Become World’s #4 Most Valuable Automaker

4 months ago by Steven Loveday 33

Tesla Model 3

Tesla Model 3

Yes, Tesla’s market cap surpassed a luxury German automaker that trades at high value, demands premium prices, and enjoys large margins.

When Tesla first passed Ford’s market cap, it was a big deal, but Ford trades low, and it’s not really a Tesla competitor in any way. The bigger news came later, when the electric automaker passed General Motors. Again, GM trades much lower than the Silicon Valley automaker, but the company is seen as substantially more successful than Ford, and has a Tesla competitor (two really) in the current market; the all-new Chevrolet Bolt, and the largely successful Chevrolet Volt.

The i3, BMW’s only all-electric vehicle, is no competition to Tesla in terms of sales or range. The company will have more options in the future, but it will be 2020 or later before that comes to fruition.

Tesla isn’t in the market to compete with the likes of Ford or GM (despite the fact that the Chevrolet Bolt has a range and price on par with that of the upcoming Model 3). Instead it gears its vehicles toward the luxury market. The upcoming Model 3 will sit alongside the legendary BMW 3 Series in terms of price, size, and dynamics.

BMW has the potential and the resources to do exactly what Elon Musk and company are doing, and while the German automaker is beginning to make strides — it’s going to be more than a few years before plans come to fruition.

This week, Tesla shares jumped 1.9 percent to pass BMW‘s market value of $61.3 billion. It was short-lived due to Hedgeye Risk Management’s suggestion to short Tesla stock. The stock dropped 3.4 percent and closed below BMW’s cap. It’s likely though that the electric carmaker will pass BMW once again and perhaps stay ahead. Analysts are estimating $400+ prices in the near future.

Skeptics still feel that Tesla’s shares are not representative of reality. When you look at profits and sales, BMW sold 2.4 million vehicles last year and the electric automaker sold about 80,000. BMW made $7.7 billion and Tesla lost $725 million. It costs BMW $59 billion in property, plants, and equipment to net $104 billion in revenue. Tesla spends about $6 billion to net $7 billion. Well-known investor, Jim Chanos, shared:

“We think they are going to be burning close to $750 million to $1 billion a quarter for the next handful of quarters.”

[Tesla] “has its big test ahead of it, the Model 3. It has been losing money selling $120,000 cars, but it hopes to make money selling the $35,000 car.”

The big kicker will be if we see a true transition to electric vehicles, sooner than later. If this becomes the case, Tesla has every advantage to lead. BMW and other German luxury automakers, as well as companies like GM and Ford, have a substantial amount of capital tied up in ICE vehicles. Transitioning to compete with the electric automaker will prove no easy task.

It’s becoming more and more obvious that people are fans of Elon Musk, and the Silicon Valley electric startup. However, the population still needs to prove that they are also fans of electric cars.

Source: Bloomberg

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33 responses to "Tesla Passes BMW In Market Cap To Become World’s #4 Most Valuable Automaker"

  1. Texas FFE says:

    Sale, sale, sale!!!

    The old adage on stocks is when everybody else is buying it’s time to sale. I’m happy that Tesla stock holders have made so much money on their investment. Tesla stock was always too speculative for my taste but if I did have any Tesla stock I would be selling like Toyota did.

  2. Brian says:

    All that really matters in this story is “BMW made $7.7 billion and Tesla lost $725 million.” In the end Tesla HAS to make money. CARB credits are going down in value and other companies are catching up with the range that Tesla has held over them for 5 years.

    I hope for the sake of the company the M3 makes them a ton of money.

    1. Mister G says:

      This is more fossil fuel supported propaganda LOL

    2. Dan Cowan says:

      M3 has been making $$$$$ for BMW. Since 1985.

  3. RC368 says:

    Tesla has a loss now only because it is spending huge amounts for infrastructure for future sales. Compared to ICE vehicles, Tesla’s Gross Profit per car is high and bound to go much higher with declining battery costs. https://www.fool.com/investing/general/2016/03/27/how-tesla-motors-could-be-profitable-if-it-wanted.aspx

    1. Pushmi-Pullyu says:

      Hmmmm, no, declining battery cell costs have allowed Tesla to add in more and more functionality and luxury touches to its cars without having to raise the prices. Tesla has not used the decline in battery cell prices to increase its profit margin.

      And in fact, Tesla can’t afford to do that. The new car market is highly competitive. If Tesla starts taking a bigger slice of its revenue as profits, then it will lose out to other EV makers who are willing to settle for a thinner profit margin.

      1. RC368 says:

        You mean, in the past. Do you really know they will always use the inevitable drop in battery cost to add luxury items to future models? Mostly I was referring to ICE cars, but regarding other EV makers, as Elon recently mentioned, nobody else is working on their scale (economies of) and cutting edge regarding batteries. Maybe that will give them a market advantage.

        1. Pushmi-Pullyu says:

          Maybe I didn’t express my argument clearly enough.

          The new car market is highly competitive. No auto maker — and that certainly includes Tesla — can afford to increase its profit margin substantially more than other auto makers within a given market segment. If one were to do so, it would price its own cars out of the market.

          If Elon Musk’s statements regarding pricing on the Model 3 are to be taken as gospel, then Tesla will respond to lower costs by lowering the price of the Model 3, rather than to keep adding in more functionality and luxuries as Tesla has done with the Models S and X.

          But Elon won’t be in control of Tesla forever. In fact, he’s previously said he plans to leave in something like 4 years from now, when the ramp up on Model 3 production is finished or at least well along. When Elon leaves, perhaps Tesla will take a fresh approach to making new models. I hope Elon is proven wrong when he says that Tesla will never make a car lower priced than the M3.

          I hope that Tesla will eventually offer an “everyman” car, and the Model 3 is too expensive to fit that category. Even if Tesla lowers the price in response to declining costs, no car with such luxury touches as an all-glass roof or fancy wheels with built-in airfoils is ever going to be an “everyman” car.

          1. RC368 says:

            Tangent.

  4. Pushmi-Pullyu says:

    I cannot understand the apparent obsession on InsideEVs with Tesla’s stock prices and “market cap”, meaning the total nominal value of all outstanding stock at today’s market price.

    Sure, it’s important to the extent that a high market cap means Tesla can borrow money at advantageous rates. This is very important as Tesla must keep borrowing more money to ramp up production rapidly. It’s also important when Tesla issues new stock, altho the percentage of its income generated by infrequent new stock offerings seems rather small.

    But the name of this website is “InsideEVs”. It’s not “Inside Tesla Financing”.

    There are plenty of other websites which focus on stocks and investments. If I wanted to read about that every day, I’d visit those websites instead of InsideEVs.

    How about keeping InsideEVs’ focus on the actual EVs, and not the money used to build them?

    1. Alan Drake says:

      A financial collapse of Telsa stock (which many people are betting on) will mean – at a minimum – an end to Telsa expansion and new models. The entire move towards EVs will slow down considerably.

      So Telsa finances are crucially important to EVs.

      1. Pushmi-Pullyu says:

        There are a lot of things “crucially important” to Tesla maintaining its strong growth. Supplier relations, shipping schedules, amount of liquid assets, amortization of manufacturing tools, lending terms.

        But I’m simply not interested in reading about any of those things in any detail whatsoever. The reason I visit InsideEVs almost every day is because I want to keep up on news about the EV revolution. Not about the latest fluctuation in Tesla’s finances, such as its “market cap”. In fact, I’d be perfectly happy not to need to know what that term even means. I treasure my ignorance of finances!

  5. Najeeb says:

    The news is wrong. 62 billion usd market cap makes tesla less than half as big as byd. So tesla could be the 5th big auto company behind toyota volkswagon byd and daimler not 4th.

    1. ffbj says:

      Perhaps they only included car-makers whose cars can be sold in the U.S.

  6. Gazz says:

    Tesla is vulnerable to any slight hiccup. Banks refusing to lend more money, production delays,restrictions on materials or components extra,extra.

    If anything comes along the hot share price will pop. Tesla still make very few cars and even at 500k per year in 2020 they will still be small.

    1. Pushmi-Pullyu says:

      “…even at 500k per year in 2020 they will still be small.”

      Hmmm, I think you’re stretching the definition of “small”. Ferrari makes only 7000 cars per year; I’d call that small. Tesla is a mid-sized auto maker, and growing much more rapidly than any other mid-sized or larger auto maker, every year.

      Ford makes about 2.5-2.6 million cars per year (or at least, has recently). If Tesla reaches 500,000 per year in 2020, and continues growing at the rate of about 45% per year, as they have been, then Tesla will be as big in 2027 as Ford is now. Perhaps then, people will finally quit moving the goal posts on what is a “small” auto maker?

      1. Kirk says:

        Tesla’s current goal I believe is to reach a production rate of 500,000 cars per year sometime in 2018 and to reach a production rate of 1 million cars per year sometime in 2020.

    2. ffbj says:

      Small, like the mouse that roared, and one that is scaring the bejeebers out of legacy car companies.
      Small in size, not in stature.

  7. wavelet says:

    “Tesla isn’t in the market to compete with the likes of Ford or GM (despite the fact that the Chevrolet Bolt has a range and price on par with that of the upcoming Model 3). Instead it gears its vehicles toward the luxury market. ”

    Whut?
    Tesla has been on the record untold times that it’s shooting for mass-market vehicles & prices (though not low-end budget ones), but has had to start off with more expensive segments due the inherent expense of BEV drivetrains.

  8. Nix says:

    There is a meme that the number of cars a car company build should somehow automatically translate into stock market cap.

    But let’s examine the number of cars built by the three car makers that Tesla market cap has been compared to over the last year.

    4. GM 7,485,587
    5. FORD 6,396,369
    12 BMW 2,279,503

    Notice that the market cap for these companies are EXACTLY OPPOSITE of the volume of vehicles they built?

    Even though GM builds the most cars, and BMW builds the least, their market caps are exactly the opposite order.

    BMW has the highest market cap of these 3 companies, despite building the fewest cars by far.

    Funny how there aren’t stories about that on the internet talking about how outrageous it is that BMW is valued more than Ford and GM despite the massively smaller volume.

    So clearly just the sales volume isn’t the only factor in market cap.

    1. Mister G says:

      Nix, very good you are an independent thinker and did not believe fossil fuel supported propaganda about Tesla. By the way Tesla is also an energy company and digital data company.

    2. Dan Cowan says:

      BMW are the #1 premium manufacturer most of this century. Not volume. Also why Ferrari makes so much $$$$$ on limited production.

  9. Chris O says:

    TESLAMANIA!!!

    I appreciate that stock value isn’t just about current but also about future performance but at some point the amount of future success that’s build into the stock price is just going to be very hard to live up to for Tesla.

    I appreciate though that Tesla gets a lot of credit for its hitherto unrivalled approach. Unlike what this article suggests Tesla’s products don’t have any competition yet, Bolt is no more a competitor for Model 3 than Sonic is for a 3-series BMW. Try sell a Sonic for 3-series money BTW, GM needs to be ready for some serious price adjustments.

    That situation will change though. Competitors like Mercedes, Audi, Jaguar and Porsche are lining up cars that could be serious Tesla competitors, especially since some of these companies also support high output charging infrastructure. Tesla will have to work even harder to deserve that market cap!

  10. arne-nl says:

    “the Model 3. It has been losing money selling $120,000 cars, but it hopes to make money selling the $35,000 car.”

    Aha, comparing near top-of-the line model S price to the bare-bones base version of the 3. How typical…

    1. Chris O says:

      That comparison isn’t fair but still….a 20-25% gross margin on Model S that start at $70K definitely suggest production cost north of $60K. Production cost of Model 3 need to be half that for it to have a decent gross margin. Skimping on a $50 display won’t go a long way in bridging the gap, I guess economies of scale will have to make most of the difference.

  11. ffbj says:

    I pretty much have closed the book on Tesla, being a futurist. It’s over, they won, at least in the car space.
    The only question is whether they pour on the points.

    1. Kirk says:

      I am currently betting 50% of my net worth that you are correct.

      1. Nix says:

        Unless you are very wealthy, and can easily manage losing half your wealth, every investment advisor with a fiduciary duty towards you would advise strongly against that high of an investment in a singe stock. Regardless of how much return it my produce.

        That is regardless of whether TSLA may continue growing in value or not.

  12. Kirk says:

    The traditional auto manufacturers are in a pretty tough bind. I’m sure they would like to gradually transition to electric transport while slowly winding down their internal combustion research, development, manufacturing etc.

    I believe this is why they favor the PHEV approach with slow gradual improvements. Unfortunately for them, Tesla is making huge strides in pure electric vehicles.

    When Elon disrupted the aerospace industry, he did it by optimizing every single aspect of rocket manufacturing. He is currently doing this also with vehicle manufacturing.

    I believe Tesla’s lead is not only in batteries, motors and and burgers but also probably in many other aspects of automobile manufacturing and design.

    1. ffbj says:

      A reasonable summation.

    2. Kirk says:

      Need to error check myself better. I meant inverters and not burgers. I use Siri for dictation.

      1. Mark.ca says:

        For a second there i was thinking how a Tesla burger might look like….

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